For personal use only HALF- YEAR REPORT

Transcription

1 HALF- YEAR REPORT For the six months ended 3 1 December 2011

2 HALF- YEAR REPORT CONTENTS CORPORATE INFORMATION... 3 DIRECTORS REPORT... 4 AUDITOR S INDEPENDENCE DECLARATION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DIRECTORS DECLARATION INDEPENDENT AUDITOR S REVIEW REPORT... 31

3 CORPORATE INFORMATION DIRECTORS Ian McMaster (Non-Executive Chairman) (resigned 28 February 2012) Michael Minosora (Managing Director) Tony Veitch (Executive Director) Alan Mulgrew (Non-Executive Director) (resigned 6 March 2012) Jay Wacher (Non-Executive Director) (resigned 6 March 2012) Phiong Phillipus Darma (Non-Executive Director) REGISTERED & PRINCIPAL OFFICE Level 29 Bankwest Tower 108 St Georges Terrace PERTH WA 6000 Telephone: Facsimile: COMPANY SECRETARY Richard Maltman (resigned 2 February 2012) Tony Veitch (appointed 2 February 2012) POSTAL ADDRESS PO Box Z5431 St Georges Terrace PERTH WA 6831 INDEPENDENT AUDITORS Ernst & Young 11 Mounts Bay Road PERTH WA 6000 HOME EXCHANGE Australian Securities Exchange Exchange Plaza 2 The Esplanade PERTH WA 6000 LEGAL ADVISERS Ashurst Australia 2 The Esplanade PERTH WA 6000 DLA Piper Level 31 Central Park St Georges Terrace PERTH WA 6000 SHARE REGISTRY Security Transfer Registrars Pty Ltd PO Box 535 APPLECROSS WA 6953 Telephone:

4 DIRECTORS REPORT Your Directors have pleasure in submitting the half-year report of Atlantic Ltd ( Atlantic or the Company ) and its controlled entities (the Consolidated Entity or the Group ), for the half-year ended 31 December DIRECTORS The Directors of the Company during the period and until the date of this report are set out below. Directors were in office for the entire period unless otherwise stated below. Mr Ian McMaster AM Non-Executive Chairman (resigned 28 February 2012) Mr Michael Minosora Managing Director Mr Tony Veitch Executive Director Mr Alan Mulgrew Non-Executive Director (resigned 6 March 2012) Mr Jay Wacher Non-Executive Director (resigned 6 March 2012) Mr Phiong Phillipus Darma Non-Executive Director Mr Richard Maltman resigned as Company Secretary on 2 February Mr Tony Veitch was appointed on 2 February REVIEW AND RESULTS OF OPERATIONS Highlights First ferrovanadium production at Windimurra Project, subsequent to half-year end Windimurra construction costs in line with budget Mine to port iron ore logistics chain completed for iron ore exports Positive exploration results at southern Windimurra tenements Development study initiated for proposed Vietnam mine-rail-port bauxite project A$25.0 million share placement to accelerate Windimurra ramp-up Subsequent to half-year end, a A$41.7m fund raising was announced Chief Financial Officer appointed The Group recorded a net loss after tax for the period of A$14.3m (2010: net loss of A$13.2m). 4

5 DIRECTORS REPORT (continued) Windimurra Vanadium Project During the period, Atlantic achieved construction completion at its 100%-owned Windimurra Project ( Windimurra ), an important milestone, in line with budget cost estimates but behind schedule by two months. Process commissioning was also completed with the exception of the last three areas of the process chain being the flash dryer, reduction kiln and ferrovanadium electric arc furnace, which were delayed due to a hold-up in gas regulatory and safety approvals. Subsequent to period end, these last plant areas were successfully commissioned culminating in first ferrovanadium production in early January Other than for the milling and beneficiation circuits, commissioning progress has been in line with expectations, with crushing, kiln and ferrovanadium circuits largely performing to plan. Recoveries through the vanadium production process are consistent with expectations for this stage of production ramp-up. Following successfully proving the plant s ability to produce ferrovanadium, Atlantic will focus its attention on accelerating production ramp-up at Windimurra to meet its previously-advised target of full production of 6,300 tonnes per annum of contained vanadium in the Q4 calendar year 2012 (previously Q1 calendar year 2013). During the period, Atlantic undertook a third party review process with specialist engineering groups to identify any further modifications that might be required to the crushing, milling and beneficiation ( CMB ) circuit to improve its performance and to assist in the production ramp-up. Atlantic has embarked on a number of the proposed modifications to the milling and beneficiation components within the CMB circuit. It is expected that all modifications will cost A$14 million. It is estimated that the major components of these works will be concluded in Q2 calendar year Steps have also been taken to reduce the impact of the modification works on the near term production ramp-up schedule. Atlantic currently expects Windimurra to progressively increase output as the modifications are put into place, and to attain 65% of plant design production capacity during Q2 calendar year Further modifications to the CMB circuit to be carried out later in the year, all included within the A$14 million modification estimate, are expected to lead to indirectly increasing the capacity of the CMB circuit to 115% of design capacity. Work is underway to convert the benefit of this additional capacity into additional vanadium production. 5

6 DIRECTORS REPORT (continued) Pentoxide Circuit As previously announced, following strong expressions of interest for the supply of premium grade vanadium pentoxide from Windimurra, particularly from the master alloy industry, Atlantic continues to investigate adding a vanadium pentoxide circuit to the Windimurra project. The addition of a vanadium pentoxide circuit has the potential to increase the vanadium production capacity of the project, provide operational flexibility and attract higher unit revenues. Marketing Vanadium During the period, the sales and marketing team, in conjunction with Element Commodities, attended a number of major industry sales events and continued to build awareness of the new supply of Windimurra vanadium. This was well received by customers. Negotiations have also continued with key potential offtake customers for Atlantic s proposed premium vanadium pentoxide product stream. Marketing Iron Ore During the period, negotiations with several customers continued regarding the initial shipment of iron ore. Atlantic has not been able to achieve commencement of iron ore shipments to date. Atlantic does not expect that the previously set target of iron ore fines sales will be reached by the end of Q1 calendar year 2012 and now expects its first shipment to occur as soon as possible following signing of an initial iron ore sales contract. Atlantic has also received offers for its direct ship ore high titano-magnetite lump product, following successful customer test work. Atlantic continues to market this lump product in addition to its existing iron ore fines products to customers. Iron Ore Logistics During the half-year, Atlantic completed the iron ore logistics supply chain for the transport of iron ore from Windimurra to the Port of Geraldton. Port arrangements for the initial export of iron ore to customers were also finalised. Site preparations for iron ore screening, loading and transport were completed along with iron ore business approvals. Loading of iron ore utilising a container-based solution was successfully trialled for other clients at Geraldton Port in mid-december. 6

7 DIRECTORS REPORT (continued) Exploration Atlantic continued its exploration activities during the period, particularly on the outcropping magnetite zones within its tenements to the south of the existing Windimurra vanadium mine. This exploration is designed to quantify the potential volume and grade of both iron ore, ilmenite and vanadium based products that could be generated by non-complex shallow mining. A surface mapping and sampling program revealed magnetite zones of up to 70 metres width with elevated iron and vanadium levels. Average sample grades returned across certain sections of the outcrops are as follows: Table 1 Traverses of 50m across the central vanadium bearing core of the outcrops SiO 2% TiO 2% V 2O 5% Fe 2O 3% Fe% Table 2 Traverses of 70m, across entire outcropping package SiO 2% TiO 2% V 2O 5% Fe 2O 3% Fe% Atlantic intends to proceed with further drilling, mapping and sampling over the area to determine the extent to which the elevated iron and vanadium levels continue below surface. Resource Development 3,620 metres of infill RC drilling on 100 metre line spacing was undertaken during the half-year to the south of the current pit cutback. This drilling will form part of a revised resource model which will enable Atlantic to select the next stage of the pit to generate the best NPV for the project. A revised mineral resource estimate will be reported in the next quarterly activity report. Vietnam In September 2011, Atlantic signed an agreement with Vietnam s Institute of Mining Science & Metallurgy ( Vimluki ), to prepare a development study for bauxite in the Central Highlands of Vietnam. Atlantic proposes a large-scale bauxite mining operation and a 260 kilometre third party access heavy haul rail line, which will transport mined bauxite from the Central Highlands to the coast where bulk port infrastructure will be built. A refinery and smelting facility may be built in Vietnam at a later stage. 7

8 DIRECTORS REPORT (continued) The development study will contribute to a full feasibility study into the integrated long-term mine-rail-port bauxite project in due course. Key Appointments Ross Glossop, Chief Financial Officer During the period, Atlantic appointed Mr Ross Glossop to the role of Chief Financial Officer and member of the senior management team. Mr Glossop has 30 years experience in the mining and resources sectors. Mr Glossop served as Regional CFO (Australia/Africa) for Barrick Gold Corporation from and has held CFO positions with Bellzone Mining Plc, Oceana Gold Corporation and most recently Apex Minerals NL. Scott Mathewson, General Manager Operations During the period, Atlantic appointed Mr Scott Mathewson to the role of General Manager of Operations. Mr Mathewson most recently worked at Rio Tinto for a period of six years the last three as Manager Operations for Dampier Salt Ltd based in Port Hedland. John Gardener, General Manager Sales & Marketing During the period, Atlantic appointed Mr John Gardener to the role of General Manager of Sales & Marketing. Mr Gardener was previously Business Development Manager for Sinosteel and Sales & Marketing Manager for Rio Tinto (Iron Ore). Mr Gardener will be responsible for sales and marketing across both vanadium and iron ore product groups. Corporate Activity In December 2011, Atlantic announced a capital raising of A$25.0 million via a placement of 20,833,333 fully paid ordinary shares in Atlantic at a fixed price of A$1.20 per share. The proceeds from this capital raising were used to finance improvements and modifications to the CMB plant at Windimurra, which have the potential to accelerate Windimurra s ramp-up to full capacity, and for general corporate purposes. The placement comprised an unconditional component raising A$18,186,000 immediately and a conditional component raising A$6,814,000, subject to shareholder approval. 8

9 DIRECTORS REPORT (continued) EVENTS SUBSEQUENT TO BALANCE DATE On 27 January 2012, an Extraordinary General Meeting was held to consider various resolutions in relation to the A$25.0 million equity placement announced by the Company on 7 December The equity placement included: an unconditional placement of 15,155,000 fully paid ordinary shares at A$1.20; a conditional placement of 4,553,333 fully paid ordinary shares at A$1.20 to Mr Michael Minosora, Managing Director of the Company; and a further conditional placement of 1,250,000 fully paid ordinary shares at A$1.20 to Droxford International Limited, the Company s largest shareholder. All resolutions were passed without amendment at the Extraordinary General Meeting. The conditional components of the placement raising $6,814,000 were completed on 24 February On 6 March 2012, the Company announced a A$41.7 million funding package. The components of this funding package are as follows: 1. Binding documentation has been executed for a A$30.0 million unsecured convertible bond issued to Droxford International Limited, the Company s largest shareholder. The key terms of this convertible bond are: Amount: Term: Coupon: Conversion Price: Conversion: A$30.0 million; 3 years; 17.5% pa, payable semi-annually in arrears. For the first three interest periods, payment will be 50% in kind and 50% in kind or cash at the holder s election and thereafter paid in cash. Payment in kind is defined as 100% payable as new convertible bonds at the issue price, which will be entitled to future coupons; A$0.97, a 10% premium to the Company s 10 day VWAP immediately prior to 6 March 2012; Converted into fully paid ordinary shares at the holder s election at any time. Conversion of the convertible bond is subject to shareholder approval and Foreign Investment Review Board approval. 2. A share subscription agreement with CPS Securities, for an unconditional placement of 1.93 million fully paid ordinary shares at A$0.88 to raise approximately A$1.7 million before expenses. 9

10 DIRECTORS REPORT (continued) 3. A share subscription agreement with the Company s Managing Director, Mr Michael Minosora, for a conditional placement of 11.4 million fully paid ordinary shares at A$0.88 to raise A$10 million. The placement is subject to shareholder approval. 4. The Company also intends to make a share purchase plan offer to its Australian and New Zealand shareholders to subscribe for up to $15,000 of new shares per shareholder at an issue price that is the lesser of $0.88 or a 5% discount to the average closing price of the Company s shares over the five days on which shares are traded prior to the offer. The share purchase plan is not underwritten and will be capped at $10 million. ROUNDING The amounts contained in the financial report have been rounded to the nearest A$1,000 (unless otherwise stated) pursuant to the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the class order applies. AUDITOR S INDEPENDENCE DECLARATION A copy of the auditor s independence declaration as required under Section 307C of the Corporations Act 2001 is set out on page 11. Signed in accordance with a resolution of the Board of Directors. MICHAEL MINOSORA Managing Director Perth, Western Australia Dated this 13th day of March

11 Auditor s Independence Declaration to the Directors of Atlantic Limited In relation to our review of the financial report of Atlantic Limited for the half-year ended 31 December 2011, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young Gavin Buckingham Partner Perth 13 March 2012 GB:MB:ATLANTIC:007 Liability limited by a scheme approved under Professional Standards Legislation 11

12 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the half-year ended 31 December December 31 December Note A$'000 A$'000 Revenue Other (expenses)/income 3 (9,475) 696 Corporate expenses 3 (2,891) (6,467) Administrative expenses 3 (1,717) (1,532) Finance expenses 3 (410) (6,582) Loss before income tax (14,308) (13,226) Income tax (expense)/benefit - - Loss after income tax (14,308) (13,226) Other comprehensive income - - Total comprehensive loss for the period (14,308) (13,226) Cents Cents Basic loss per share (12.4) (17.0) Diluted loss per share (12.4) (17.0) The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes to the financial statements. 12

13 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December December 30 June Note A$'000 A$'000 Assets Current assets Cash and cash equivalents 5 57, ,248 Trade and other receivables 1,525 13,587 Inventory 6,844 1,922 Other current assets 3,686 1,239 Assets classified as held for sale 6 1,430 - Total current assets 71, ,996 Non-current assets Property, plant and equipment 7 380, ,107 Cash and cash equivalents 5-17,937 Trade and other receivables 9,286 8,667 Total non-current assets 389, ,711 Total assets 460, ,707 Liabilities Current liabilities Trade and other payables 33,754 28,994 Loans and borrowings 3, Provisions 3,252 2,967 Total current liabilities 40,076 31,977 Non-current liabilities Loans and borrowings 316, ,453 Provisions 21,500 15,615 Total non-current liabilities 337, ,068 Total liabilities 377, ,045 Net assets 82,780 78,662 Equity Contributed equity 8 109,194 90,878 Reserves (2,229) (2,339) Accumulated Losses (24,185) (9,877) Total equity 82,780 78,662 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes to the financial statements. 13

14 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the half-year ended 31 December 2011 Ordinary Option Shares reserved for Executive Incentive Accumulated shares reserve Plan losses Total A$'000 A$'000 A$'000 A$'000 A$'000 Balance at 1 July , (2,543) (9,877) 78,662 Loss for the period (14,308) (14,308) Other comprehensive income Total comprehensive profit for the period (14,308) (14,308) Transactions with owners in their capacity as owners: Shares issued 18, ,816 Transaction costs on share issues (500) (500) Amounts expensed for shares issued under Executive Share Incentive Plan ("ESIP") Balance at 31 December , (2,433) (24,185) 82,780 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes to the financial statements. 14

15 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) For the half-year ended 31 December 2010 Ordinary Option Shares reserved for Executive Incentive Accumulated shares reserve Plan losses Total A$'000 A$'000 A$'000 A$'000 A$'000 Balance at 1 July 2010 (previously stated) 24, ,717 (22,225) 3,713 Restatements: Shares issued under ESIP 4,339 - (4,339) - - Amounts expensed for shares issued under ESIP (237) - Property, plant and equipment capitalised Restated balance 1 July , (2,385) (22,177) 3,998 Loss for the period (13,226) (13,226) Other comprehensive income Total comprehensive loss for the period (13,226) (13,226) Transactions with owners in their capacity as owners: Shares issued 60, ,050 Transaction costs on share issues (546) (546) Options issued Shares issued under ESIP 2,270 - (2,270) - - Amounts expensed for shares issued under ESIP - - 1,166-1,166 Balance at 31 December , (3,489) (35,403) 51,518 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes to the financial statements. 15

16 CONSOLIDATED STATEMENT OF CASH FLOWS For the half-year ended 31 December December 31 December Note A$'000 A$'000 Cash flows from operating activities Payments to suppliers and employees (9,925) (6,621) GST received 11,235 - Acquisition costs for Midwest Vanadium Pty Ltd - (435) Interest received Interest paid (18,517) (164) Net cash flows used in operating activities (16,440) (6,625) Cash flows from investing activities Purchase of property, plant and equipment (66,634) (19,084) Cash acquired on acquisition of Midwest Vanadium Pty Ltd - 27,617 Payment for shares in Midwest Vanadium Pty Ltd - (3,000) Net cash flows (used in)/from investing activities (66,634) 5,533 Cash flows From financing activities Proceeds from issue of shares 19,170 56,310 Capital raising costs - (670) Repayment of borrowings (16) (10,072) Borrowing costs - (621) Net cash flows from financing activities 19,154 44,947 Net (decrease)/increase in cash and cash equivalents (63,920) 43,855 Cash and cash equivalents at beginning of the period 118,185 4,118 Net foreign exchange differences 3,269 - Cash and cash equivalents at end of the period 5 57,534 47,973 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes to the financial statements. 16

17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the half-year ended 31 December CORPORATE INFORMATION The consolidated financial report of Atlantic Ltd for the half-year ended 31 December 2011 was authorised for issue in accordance with a resolution of the Directors on 13 th March Atlantic Ltd ( Atlantic or the Company ) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The registered office and principal place of business of the Company is Level 29, Bankwest Tower, 108 St Georges Terrace, Perth WA The financial report of the Company for the half-year ended 31 December 2011 comprises the Company and its subsidiaries (together referred to as the Consolidated Entity or Group ). 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A Basis of Preparation This interim financial report for the half-year ended 31 December 2011 has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act The half-year financial report does not include full disclosures of the type normally included in an annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and cash flows of the Consolidated Entity as the full financial report. It is recommended that this half-year financial report be read in conjunction with the annual financial report for the year ended 30 June 2011 and any public announcements made by Atlantic during the half-year in accordance with continuous disclosure requirements of the ASX Listing Rules. The half-year financial report has been prepared on an accrual basis and is based on historical costs, except derivative financial instruments which are measured at fair value. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars (A$ 000) unless otherwise stated pursuant to the option available to the Company under ASIC Class Order 98/100. Apart from the changes in accounting policy noted below (Note 2c), the accounting policies and methods of computation are the same as those adopted in the most recent annual financial report. 17

18 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) B Going Concern The Group has cash on hand at 31 December 2011 of A$57.534m. Included within this cash on hand is A$38.112m (US$38.707m) which is reserved for the February 2012 and August 2012 interest payments under the senior secured notes and a minimum holding balance of A$4.923m (US$5.000m) required to be held under the senior secured notes. This leaves cash on hand at 31 December 2011 of A$14.499m for general working capital. The Group has trade and other payables at 31 December 2011 of A$33.754m and short term insurance premium funding of A$3.070m. Included within this trade and other payables amount is A$14.194m in interest accruals associated with the senior secured notes February 2012 interest payment. This amount is payable out of the A$38.112m interest reserve account. The balance of trade and other payables is A$22.630m. The Group also has capital commitments relating to the construction and commissioning of the Windimurra Project of A$6.874m. At 31 December 2011, this leaves a working capital deficit of A$15.005m. The funds available at the half-year end will not meet planned activities for the forthcoming twelve months. These planned activities include estimates and judgements which can be modified to significantly reduce levels and timing of expenditure if required. The current status of the Group s activities does not yet provide for production revenues. The Group has met its working capital commitments to date by raising the required capital through a share placement during December 2011 where the Company raised A$18.2m from the issue of 15,155,000 fully paid ordinary shares at A$1.20 each. Subsequent to the half-year end, the following fund raisings were announced: Finalisation of the December 2011 capital raising with the conditional components being completed on 24 February 2011 raising A$6.8m; A$30m in convertible bonds issued to the Company s largest shareholder. A$20m under the convertible bonds has been received. The remaining A$10m is scheduled to be received on 30 March Conversion of the convertible bonds is subject to shareholder and Foreign Investment Review Board approval; A$1.7m share placement to clients of CPS Securities comprising of 1.93m shares issued at A$0.88 cents per share; A$10m share placement to the Company s Managing Director, subject to shareholder approval. This placement comprises of 11.4m shares issued at A$0.88 cents per share; and 18

19 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) B Going Concern (continued) A share purchase plan offer to the Company s shareholders, which will not be underwritten and is capped at A$10m. The Directors are satisfied that the Group will continue to operate as a going concern and base this view on the following factors: Commissioning at the Windimurra Project has been completed and the plant has successfully produced ferrovanadium. Production is scheduled to ramp up over the coming months; The modifications required to the Crushing, Milling and Beneficiation plant at the Windimurra Project have been reviewed by independent engineering experts and a detailed implementation plan has been developed; and The Directors monitor expenditure against budget activities and will adjust budget activities as appropriate. There are a number of inherent uncertainties about the achievement of future plans including: Achieving production ramp up at the Windimurra Project in accordance with the Group s plan; Fluctuations in commodity prices; Fluctuations in the AUD:USD foreign exchange rates; and Instability in the debt and equity markets. In the event that the above uncertainties have an adverse impact on the Group s forecast working capital requirements, then the Group would need to consider further fund raisings to maintain the basis for going concern. The Directors are confident that in the event that this should be required the Group has the ability to source additional funds through the debt and equity markets. Should the Group not be able to complete the capital raisings announced to fund the ongoing ramp up of the Group s Windimurra Project or source additional working capital as and when required, there would be significant uncertainty as to whether the Group would be able to meet its debts as and when they fall due and thus continue as a going concern. The Directors are confident that they will be able to complete the fund raisings announced. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts or classifications of liabilities that might be necessary should the Group not be able to continue as a going concern. 19

20 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) C New Accounting Standards and Interpretations The following amended Australian Accounting Standards and Interpretations relevant to the operations of the Consolidated Entity have been adopted from 1 July AASB Amendments to Australian Accounting Standards Classification of Rights Issues [AASB 132], effective 1 February 2010; AASB Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 3, 7, 121, 128, 131, 132 and 139], effective 1 July 2010; AASB Amendments to Australian Accounting Standards [AASB 5, 8, 108, 112, 119, 133, 137, 139, 1023, 1031 and Interpretation 2, 4, 16, 1039, 1052], effective 1 January 2011; AASB Amendments to Australian Interpretation Prepayments of a Minimum Funding Requirement, effective 1 January 2011; AASB 124 (Revised) Related Party Disclosures (December 2009), effective 1 January 2011; AASB Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, 7, 101, 134 and Interpretation 13], effective 1 January 2011; and, AASB Amendments to Australian Accounting Standards [AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 137, 139, 140, 1023, 1038 and Interpretation 112, 115, 127, 132 and 1042], effective 1 January The adoption of these standards did not have any impact on the current period or any prior period and is not likely to affect future periods. 20

21 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 3 REVENUE AND EXPENSES 31 December 31 December A$'000 A$'000 Revenue Interest Other (expenses)/income Net foreign exchange (losses)/gains (9,475) 683 Other - 13 (9,475) 696 Corporate expenses Depreciation 69 5 Business development expenses Employee benefits expense 1,230 1,819 Acquisition costs - 2,840 Other corporate expenses 1,326 1,771 2,891 6,467 Administrative expenses Vietnam Bauxite Project administration costs Depreciation - 57 Employee benefits expense Other administration expenses Impairment - write down of held for sale assets (Note 6) 338-1,717 1,532 Finance expenses Interest expense - finance leases and other borrowings - 6,326 Unwinding of the discount of the rehabilitation provision ,582 (i) As at 31 December 2011, borrowing costs associated with the senior secured notes of A$23.355m have been capitalised in accordance with International Financial Reporting Standards. As at 31 December 2011, the construction and development of the Windimurra Project is considered a qualifying asset. 21

22 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 4 DIVIDENDS There were no dividends paid or provided for during the half-year and up to the date of this report. 5 CASH AND CASH EQUIVALENTS For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents comprise the following: 31 December 30 June A$'000 A$'000 Current cash and cash eqivalents Cash at bank and on hand (i) 57, ,248 Non-current cash and cash equivalents Cash interest reserve - 17,937 Restrictions on cash and cash equivalents: (i) Included within cash and cash equivalents disclosed above is A$7.731m that is specifically reserved for the construction and commissioning of the Windimurra Project owned by Midwest Vanadium Pty Ltd ( MVPL ). The A$7.731m consists of the A$4.923m (US$5.000m) minimum holding balance and A$2.808m funds available for general working capital. At 31 December 2011, the use of this cash requires approval on behalf of the senior secured note holders from both the independent engineer and security trustee. Following project completion of the Windimurra Project, this approval is no longer required, and as a consequence any surplus funds will become unrestricted. Also included in cash and cash equivalents above is an amount of US$38.707m (A$38.112m) which is restricted to the payment of the second and third interest payments under the senior secured notes. The interest payment dates are 15 February 2012 and 15 August 2012 for the amount of US$19,262,500 respectively. 22

23 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 6 ASSETS CLASSIFIED AS HELD FOR SALE At 31 December 2011, Midwest Vanadium Pty Ltd ( MVPL ) re-classified A$1.768m included in Property, Plant and Equipment as Assets Under Construction to Held for Sale. Included within the Statement of Comprehensive Income Administrative Expenses is a write down of the carrying value of these assets of A$0.338m to reflect the fair value less costs to sell. These assets consist of accommodation unit s surplus to the Group s requirements since the construction phase of the Windimurra Project has been completed. The Group intends to sell these accommodation units within the next six months. The applicable operating segment is the Windimurra Project. Subsequent to half-year end, these accommodation units have been sold at an amount materially close to their carrying value. 23

24 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 7 PROPERTY, PLANT AND EQUIPMENT Site plant & Leased Office Assets under Mine properties equipment assets equipment construction and development Total A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 For the half-year ended 31 December 2011 At 1 July 2011 net of accumulated depreciation 125, ,452 17, ,107 Additions , ,493 Borrowing costs capitalised ,355-23,355 Change in rehabilitation provision ,475 5,475 Depreciation charge for the half-year (141) (20) (89) (69) At 31 December 2011 net of accumulated depreciation 125, ,800 23, ,361 At 31 December 2011 Cost 125, ,800 23, ,002 Accumulated depreciation (357) (51) (233) - - (641) Net carrying amount 125, ,800 23, ,361 At 30 June 2011 Cost 125, ,452 17, ,499 Accumulated depreciation (217) (31) (144) - - (392) Net carrying amount 125, ,452 17, ,107 24

25 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 8 CONTRIBUTED EQUITY Total Number Number Quoted $'000 Ordinary securities As at 31 December ,900, ,900, ,194 Changes during the period, net of issue costs Increases through exercise of listed options 3,143,279 3,143, Increases through placements of shares to sophisticated investors 15,155,000-17,686 Options on issue Total Number Number Quoted Exercise Price Expiry Date As at 31 December Changes during the period Exercise of listed options 3,143,279 3,143, /12/2011 Lapsing of listed options 330, , /12/

26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 9 OPERATING SEGMENTS Windimurra Unallocated Project Vietnam Corp/Other Elimination Consolidated A$'000 A$'000 A$'000 A$'000 A$' December 2011 Segment revenue - external Segment revenue - internal - - 2,094 (2,094) - Other income/(expenses) (9,470) - (5) - (9,475) Corporate expenses - - (3,333) 442 (2,891) Administration expenses (1,275) (442) - - (1,717) Finance expenses (410) (410) Segment operating loss before tax (11,057) (442) (1,157) (1,652) (14,308) Income tax (expense)/benefit - Loss after income tax (14,308) Included in the above: Share-based payment expense Segment assets 448,022-77,090 (64,446) 460,666 Segment liabilities 377,732 2,983 2,103 (4,932) 377,886 Capital expenditure 70, ,493 26

27 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 9 OPERATING SEGMENTS (continued) Windimurra Unallocated Project Vietnam Corp/Other Consolidated A$'000 A$'000 A$'000 A$' December 2010 Segment revenue - external Other income Corporate expenses - - (3,331) (3,331) Administration expenses (3,949) (719) - (4,668) Finance expenses (6,582) - - (6,582) Segment operating loss before tax (9,596) (719) (2,911) (13,226) Income tax (expense)/benefit - Loss after income tax (13,226) Included in the above: Share-based payment expense 14 1,152-1,166 Segment assets 237,130-4, ,189 Segment liabilities 189, ,956 Capital expenditure 18, ,084 The unallocated Corporate/Other segment does not represent an operating segment as defined by AASB 8, however this information is analysed in this format by the Chief Operating Decision Makers, and forms part of the reconciliation of the results and positions of the operating segments to the financial statements. 27

28 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 10 CONTINGENT ASSETS AND CONTINGENT LIABILITIES The Directors are not aware of any contingent liabilities or contingent assets as at 31 December CAPITAL COMMITMENTS At 31 December 2011, the Group had A$6.874m (June 2011: A$24.7m) in capital commitments due within one year in relation to the construction and commissioning of the Windimurra Project. 12 EVENTS AFTER THE REPORTING PERIOD On 27 January 2012, an Extraordinary General Meeting was held to consider various resolutions in relation to the A$25 million equity placement announced by the Company on 7 December The equity placement included: an unconditional placement of 15,155,000 fully paid ordinary shares at A$1.20; a conditional placement of 4,553,333 fully paid ordinary shares at A$1.20 to Mr Michael Minosora, Managing Director of the Company; and a further conditional placement of 1,250,000 fully paid ordinary shares at A$1.20 to Droxford International Limited, the Company s largest shareholder. All resolutions were passed without amendment at the Extraordinary General Meeting. The conditional components of the placement raising $6,814,000 were completed on 24 February On 6 March 2012, the Company announced a A$41.7 million funding package. The components of this funding package are as follows: 1. Binding documentation has been executed for a A$30.0 million unsecured convertible bond issued to Droxford International Limited, the Company s largest shareholder. The key terms of this convertible bond are: Amount: Term: Coupon: A$30.0 million; 3 years; 17.5% pa, payable semi-annually in arrears. For the first three interest periods, payment will be 50% in kind and 50% in kind or cash at the holder s election and thereafter paid in cash. Payment in kind is defined as 100% payable as new convertible bonds at the issue price, which will be entitled to future coupons; 28

29 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 12 EVENTS AFTER THE REPORTING PERIOD (continued) Conversion Price: Conversion: A$0.97, a 10% premium to the Company s 10 day VWAP immediately prior to 6 March 2012; Converted into fully paid ordinary shares at the holder s election at any time. Conversion of the convertible bond is subject to shareholder approval and Foreign Investment Review Board approval. 2. A share subscription agreement with CPS Securities, for an unconditional placement of 1.93 million fully paid ordinary shares at A$0.88 to raise approximately A$1.7 million before expenses. 3. A share subscription agreement with the Company s Managing Director, Mr Michael Minosora, for a conditional placement of 11.4 million fully paid ordinary shares at A$0.88 to raise A$10 million. The placement is subject to shareholder approval. 4. The Company also intends to make a share purchase plan offer to its Australian and New Zealand shareholders to subscribe for up to $15,000 of new shares per shareholder at an issue price that is the lesser of $0.88 or a 5% discount to the average closing price of the Company s shares over the five days on which shares are traded prior to the offer. The share purchase plan is not underwritten and will be capped at $10 million. 29

30 DIRECTORS DECLARATION In the opinion of the Directors: 1. The financial statements and notes of the Consolidated Entity for the half-year ended 31 December 2011 are in accordance with the Corporations Act 2001, including: a) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and b) giving a true and fair view of the Consolidated Entity s financial position as at 31 December 2011 and of its performance for the half-year ended on that date; 2. Subject to the matters discussed in Note 2B, there are reasonable grounds to believe that the Consolidated Entity will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of Directors. MICHAEL MINOSORA Managing Director Perth, Western Australia Dated this 13 th day of March

31 To the members of Atlantic Limited Report on the Half-Year Financial Report We have reviewed the accompanying half year financial report of Atlantic Limited, which comprises the statement of financial position as at 31 December 2011, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors declaration of the consolidated entity comprising the company and the entities it controlled at the half year end or from time to time during the half-year. Directors Responsibility for the Half-Year Financial Report The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity s financial position as at 31 December 2011 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations As the auditor of Atlantic Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review, we have complied with the independence requirements of the Corporations Act We have given to the directors of the company a written Auditor s Independence Declaration, a copy of which is included in the Directors Report. GB:MB:ATLANTIC:008 Liability limited by a scheme approved under Professional Standards Legislation 31

32 Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Atlantic Limited is not in accordance with the Corporations Act 2001, including: i ii giving a true and fair view of the consolidated entity s financial position as at 31 December 2011 and of its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations Emphasis of Matter Without qualifying our conclusion, we draw attention to Note 2B of the half-year financial report. As a result of these matters, there is a significant uncertainty whether the consolidated entity will be able to continue as a going concern and therefore whether it will be able to realise its assets and extinguish its liabilities in the normal course of business at the amounts stated in this half-year financial report. The half-year financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the consolidated entity not continue as a going concern. Ernst & Young G Buckingham Partner Perth 13 March 2012 GB:MB:ATLANTIC:008 32